Mobile giants are ordered to slash call charges

Mobile phone users could benefit from annual savings of more than £200million amid a crackdown on firms.

The Competition Commission yesterday suggested the major companies were operating in a complex monopoly which was pushing up bills.

It also criticised the big four networks - Vodafone, O2, Orange and T-mobile - for confusing customers with a selection of packages and prices that made it impossible to work out the best deal.

The industry charges as much as 50p a minute at peak time for calls from a mobile to another network and 22.5p for calls to mobiles from landlines.

Calling a mobile overseas can cost up to £1.50 a minute - an issue which is being investigated separately by the EU competition Commissioner Mario Monti. The person receiving the call also pays a charge.

The report urges reductions of around 7p a minute on the highest mobile charge, bringing it down to 43p, with the cost of phoning a mobile from a landline dropping 4p to a maximum of 18.5p.

It threatens to go further than telecoms regulator Oftel, which had proposed a gradual reduction in prices over four years.

The Commission report - which specifically addresses the exorbitant cost of making a call to a mobile phone in the UK - was welcomed by the National Consumer Council, which backs a large one-off cut in call charges.

The Commission also wants to bring new third generation - 3G - mobiles under price controls and may insist that the industry simplifies call packages so that customers can identify the best value.

The big four refused to accept a price cut when it was proposed by Oftel last September.

The body was therefore forced to take its case to the Competition Commission in an attempt to force through reductions.

The Commission said the millions of pounds raised through the excess charges were being spent on expensive marketing campaigns and TV commercials.

Some of the cash is used to subsidise the cost of handsets, while a certain amount goes in bonuses to salesmen.

Oftel has previously accused phone firms of making 'supernormal profits'.

The Commission confirms this view, but does not name names.

The industry has claimed that any attempt to cut prices will hit its ability to fund the introduction of 3G mobile services. These include highspeed internet access and video capability on handsets.

The firms say they have been over- charged by billions of pounds by Chancellor Gordon Brown for the licenses to offer these new services. Consequently, they argue, they cannot afford any cut in income.

However, the National Consumer Council rubbished these claims.

Its spokesman said: 'It would be quite wrong for the industry to complain that because they have overpaid for 3G licences that consumers should foot the bill through unfair charges.'

She added: 'The only way a market can work effectively is if the customer has clear information to make a choice. That is not happening on mobile phone tariffs.'

The mobile phone companies rejected the findings.

Orange said it was 'disappointed' and insisted it would continue to make the case 'that there is no need for regulation of the kind proposed initially by Oftel'.

The Competition Commission report will publish a final report and decision at the end of this year.